16 bit vs 8 bit

I have a Nikon D50 and I typically shoot it in Raw Mode.
I have been playing with several work flows. I love working in layers, but if I uncheck all the RAW enhancements on import and leave it in 16bit mode, I cannot use the layers until I convert it to 8 bit.
I read somewhere that leaving it in 16 bit mode for auto-levels and auto-color correction is a good idea.
I usually try this and then convert to 8 bit to do some finishing (reduce noise, unsharp, adjust skin tone).
Is this consistent with what others have found? Or do you prefer to use 8 bit mode right off (is the difference not that huge)?

I agree with Barbara, and agree to disagree with straight conversion to JPEG in almost any case, but see the point that if you aren't taking advantage of RAW, you are letting some process decide for you -- one that can't see the image. However, in Elements 4, you still have the potential to make limited changes in 16-bit, so letting the camera convert to JPEG isn't the best option, even if you don't make corrections in the dialog.
Unchecking the boxes isn't enough for working with the RAW plugin. You want to move the sliders about to try some balance and variations of tone. the dialog tries to guess for you by looking at the weighting of capture information, but in many exposure situations it will not produce the best result. You can make some changes to make the most of the capture information before moving to Elements--and continuing to improve the image.
As to workflow, have a look at the course offered on Betterphoto.com:
http://www.betterphoto.com/photocourses/RIC01.asp

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